U.S. natural gas production levels are currently at a record high, thanks to the use of horizontal drilling and fracking to extract the resource in the Marcellus Shale in the Northeast.
The gross output from the Northeast is expected to average about 15.235 billion cubic feet per day in July, a 28 percent increase from a year earlier, and thereafter edge higher to 15.482 billion next month, according to the U.S. Energy Information Administration in its monthly report released on Monday.
The Marcellus shale deposit contributes around 16 percent of the total natural gas output in the U.S., a sharp increase from 2 percent in 2008, resulting in a 70 percent drop in local gas prices. The country is scheduled to begin exporting via the Gulf Coast to overseas consumers.
“This is the latest round of big numbers from the Marcellus,” Martin King, a Calgary-based analyst with FirstEnergy Capital Corp. told Bloomberg. “There is more focus on supply and how that is weighing on prices.”
The supply glut adjacent to the largest cities in the Eastern part of U.S. has kept spot prices at a discount against the target Henry Hub in Louisiana in times of low demand. The spot prices of the gas on the Transco Zone pipeline supplying New York City fell 4.1 percent to $2.24 per million British thermal units (Btu) at the Intercontinental Exchange on July 11, $1.85 less than the Henry Hub price. It was the lowest level since April 25, 2012.
Over the past 5 years, the New York spot price has stood at 31 cents above the Henry Hub on average. On the other hand, the spot prices at Algonquin City Gates, an area that includes Boston, plunged to $2.5885 per million Btu last Friday, the lowest level since June 13, 2012. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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